Fund shop Fidelity Personal Investor has cut its charges – which it says are
cheaper than rival Hargreaves Lansdown's

Fidelity Personal Investor has become the latest fund supermarket to announce its new pricing structure, which has cut the annual cost for its 255,000 customers.

Before announcing its new prices, the broker last week promised to be cheaper than Hargreaves Lansdown, the biggest player for DIY investors, for "the majority of investors".

After this morning's announcement of the new charges, it appears that Fidelity has kept its promise.

The fund shop will, like Hargreaves, levy an annual charge as a percentage of the total assets that a saver holds. Fidelity’s charge is 0.35pc for savers with less than £250,000, while Hargreaves' equivalent charge will be 0.45pc.

For investors with assets of between £250,000 and £1m, Fidelity's charge falls to 0.2pc of the total value of the investments.

Savers will also pay a separate fee to the fund manager. The average annual fee on a fund in Fidelity’s Select List, a selection of about 140 of the most popular funds that includes 18 of Fidelity's own products, will be 0.64pc. This is similar to the 0.65pc average fund fee on Hargreaves’ "Wealth 150" list. But the average charge for 27 of the Wealth 150 will be even lower at 0.54pc.

Comparing fund supermarkets is difficult because the price you pay depends on which funds you pick, but it seems on the surface that Fidelity is cheaper than Hargreaves Lansdown.

In total a Hargreaves Lansdown client will now expect to pay 1.1pc a year in charges, to cover both the fund supermarket and the fund manager. This will net the average customer a saving of around £23 a year on every £10,000 investment, compared with the company's current system.

The same saver who chooses Fidelity instead will pay 0.99pc a year in charges. This equates to a £99-a-year charge on a £10,000 investment, whereas under its old pricing model savers would have paid £175.

Mark Till, head of personal investing at Fidelity, said savers would not pay any additional fees, such as fund switching charges or exit fees, which are levied by some other fund shops.

“We have been able to deliver an overall cost of buying investments that really meets the needs of our customers – extremely competitive and simple, making it easy to understand the total cost of investing,” he said.

How does Fidelity compare with other fund shops?

The 0.35pc annual charge is higher than some of its rivals, including Charles Stanley Direct and Cavendish Online, which both charge 0.25pc a year, and AJ Bell Youinvest, whose charge is 0.2pc.

Alliance Trust Savings and Interactive Investor both remain far cheaper for those with big portfolios, as they charge flat annual fees and charge each time you buy and sell funds or shares. Alliance Trust, for example, charges £90 for holding your Isas and a £12.50 dealing fee.

Axa, the French-owned insurer and fund manager, unveiled the pricing for its DIY investor service earlier this week. The firm will charge 0.5pc a year, but the fee will be waived until May 2015, which, it argues, makes its offering cheaper than a number of its competitors over the next couple of years.

Justin Modray of Candid Money, who analyses fund supermarkets' charges, said savers would be better off using a cheaper discount broker, such as Cavendish Online.

“It is no surprise that Fidelity has chosen to undercut Hargreaves Lansdown on price, but then that was hardly going to be difficult. However, charging 0.35pc on the first £250,000 invested still looks expensive in most cases and Fidelity has missed a golden opportunity to start a real platform price war,” said Mr Modray.

“Investors who want to use the Fidelity platform would probably be better off accessing it via discount broker Cavendish Online for 0.25pc a year.”

As we have reported already, such comparisons can be of limited use as costs vary significantly according to the type of holdings in an investor's portfolio, the size of the portfolio and the frequency of trading.

Another thing to bear in mind is that Fidelity offers only five investment trusts – which are all managed by Fidelity. If you hold other investment trusts at a rival fund shop and are looking to move, Fidelity is not an option.

But Fidelity does offer a share Isa - called the ShareNetwork Isa - which includes a wider selection of investment trusts. Charges come in at £5.10 a month, while online trading fees are £9 a trade.

Why were the rules changed?

The change to the way fund supermarkets make money has been brought in because regulators are concerned commission payments creates bias. It also hoped that greater clarity will reduce the cost.

Under the new regime fund supermarkets will charge customers directly. Investors will pay two charges – one will be the fee to the fund manager (collected from your fund money) and the other will be the fund supermarket charge.

Some fund supermarkets will charge a flat fee for accounts or dealing while others will levy a percentage fee on your savings pot. Some will use a mix of both.

A number of fund shops have already moved to the new charging structure, including Alliance Trust Savings and Charles Stanley Direct.

One major fund shop – Barclays Stockbrokers – has not yet announced its new charges. Based on current prices, customers would save by switching to a rival offering new model.

Many of the smaller fund shops, such as Bestinvest and Chelsea Financial Services, are also keeping their powder dry.